Blog Post

Why You Need to Know About Subrogation

by Thomas Zuo

Have you ever wondered what happens after your insurance company has paid a claim on behalf of your home insurance policy? In many situations, if there is another party responsible for the claim (other than you, the insured) your insurer may pursue subrogation. This is the process of recovering amounts paid under an insurance policy and it has some important ramifications for you as a policyholder. Your insurer’s ability to pursue subrogation can benefit you, but at the same time, you have some obligations to protect your insurance company’s right and ability to pursue it.

When you have damage to your home or personal property that is covered under your home insurance policy, you can work directly with your insurance company to resolve the claim regardless of where you live: Columbus, Dallas, Denver, Detroit, El Paso. This is known as a first party claim and you do not have to prove any liability or fault of any party. Instead, all you have to do is establish that the cause of your claim is not excluded from your insurance policy. The home insurance policy’s coverage is designed to provide you with an efficient means of reimbursement. However, if there is an outside party responsible for your claim, you also have the option of pursuing them directly for damages.

As an example, if your neighbor’s tree fell on your house, you can either make a claim directly against your neighbor or against your home insurance policy. If you were to pursue you neighbor, they would then report your claim to their home insurance policy under their personal liability coverage. You would then have to work with their insurer as an adverse party, which has its challenges. The insurer will require you to prove that their insured (your neighbor) was liable for your damages, and then you’ll also have to prove the extent of your damages. On the other hand, the claim with your own insurance company will be far less difficult. If you go this route, you can be assured that your insurance company will subsequently take up the claim with your neighbor’s insurer after resolving the matter with you.

Subrogation serves two primary purposes in that it allows you the benefit of working with your own insurer for ease of claims handling, and it also allows your insurance company to recover what it paid on your claim. You should consider the option of working with your own insurance company as a benefit of your home insurance policy. Even though there is another party that may be responsible, your claim process will go much more smoothly if you work with your own insurer.

One thing to be mindful of during the claim process is that you must not do anything to jeopardize your insurance company’s ability to subrogate. For example, you cannot independently settle a claim with the liable party that would diminish your insurer’s ability to subrogate and collect reimbursement of what they paid to you. Additionally, the policy requires you to cooperate in the investigation and pursuit of subrogation. You may be called to testify if the case goes to trial. In many situations, the insurance companies have an agreement to settle subrogation matters out of court, but it can escalate if the claim is of high value.

You should not hesitate to handle your claim directly with your own insurer, even if a third party is at fault. Part of the benefit of your coverage is the ability to resolve property damages claims on a first party basis. Subrogation allows your insurer to be made whole, and also shelters you, to a large extent, from the troubles of pursuing a liability claim on your own.